Financial Overview

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	399,378	365,246	9.3	-Sales in Japan decreased 0.4 percent year-on-year, while sales in North America, Europe and Asia increased from the previous year’s results.
Operating income	2,784	(360)	-	-The Company returned to profitability by improving its production efficiency, reducing costs and realigning its supply chain.
Ordinary income	2,365	(1,136)	-
Current net income	3,252	(4,040)	-

Business Plan

-In 2014, the Company mapped out its second mid-term business plan that covers the period between April 2014 and March 2017. The Company aims to increase its annual sales to JPY 395,000 million and raise its operating income to JPY 8,000 million by the final year of the plan through the following initiatives:

Objectives	Detail
1. Enhancing safety and quality features while stably supplying products to customers	-
2. Increasing profitability by improving manufacturing methods and advancing core technologies	The Company is developing thin-walled ultra high-strength materials by adopting hot-stamping methods and using cold-rolled high-tensile steel plates (tensile strength of 120K). These technologies are expected to help improve collision-safety performances while reducing vehicle weight -The Company will enter the automotive hot stamped parts market in the fiscal year ending March 2016. Hot stamping is a press-molding method using heated steel plate, which enables producing super high-tensile vehicle body frame parts with a tensile strength level of 1,500MPa. Two new lines will be installed at the Mutsumi Plant in Okazaki City, Aichi, Japan, by 2015 and the Company will start to supply hot stamped parts to automakers. The investment will amount to JPY 1.6 billion. The Company will introduce a new molding method to produce body frame parts which contribute to improving collision safety performance and reducing weight of automobiles. Futaba Industrial will also work to develop next-generation parts molding technology to produce parts with a tensile strength of 1,200MPa to differentiate itself from its rivals. (From an article in the Nikkan Jidosha Shimbun on February 6, 2014)
3. Introducing best practices at global operations efficiently	-The Company is promoting local procurement in USA, China, and Europe. The Company hopes to reduce the supply of components that are made in Japan by 70 percent by fiscal year 2017. The export value of components to the three regions amounted to more than JPY 11.1 billion in fiscal year 2012. The Company aims to localize production by developing and nurturing local suppliers, as well as starting in-house production in each region. Although the value of the yen has dropped to 104 against the dollar, the Company wants to establish a stable profit structure that will not be affected by exchange rate fluctuations in the long-term. Futaba will focus primarily on strengthening its competitiveness in the North American market. (From an article in the Nikkan Jidosha Shimbun on December 26, 2013)
4. Refining core technology to provide new value and products	-New exhaust heat recovery system leveraging the Company's heat management technology: The Company, a Toyota-affiliated supplier of mufflers and stamping parts, aims to expand its business with companies outside the Toyota Group with its new POWEREV exhaust heat recovery system. It is normally very difficult for suppliers to develop and produce mufflers for new customers. This is because muffler development requires close collaboration with a customer throughout the entire vehicle design process. On the other hand, an exhaust heat recovery system is a component that can be designed independently. The Company will propose the POWEREV to various automakers, hoping to more than double its sales to JPY 10 billion by the fiscal year ending March 2021. The Company also expects that gaining new customers with the POWEREV will create opportunities for orders of its total exhaust systems from a number of Japanese, U.S. and European OEMs. (From an article in the Nikkan Jidosha Shimbun on December 3, 2013)
	-The Company will step up the development and commercialization of environmentally friendly products, especially in the areas of diesel particulate filters and fuel-cell technology for residential use.
5. Developing high-quality human resources and increasing organizational power	-

Contract

Exhaust heat recovery system
-In November 2013, the Company announced that it is supplying its new POWEREV exhaust heat recovery system for the Mazda "Axela Hybrid", which was released on November 21. This is the first time that Futaba Industrial's exhaust heat recovery systems, featured on the Toyota "Prius" and other models, have been used in a non-Toyota vehicle. The Axela Hybrid is Mazda's first hybrid car. It was developed through a technology licensing agreement with Toyota. An exhaust heat recovery system helps warm up the engine by transferring exhaust heat to engine coolant. It can also be used as a power source to improve heating efficiency. The POWEREV offers a 50 percent reduction in size and weight compared to conventional products, and improves heat exchange performance by 30 percent. The supplier is poised to propose the new product to Japanese, U.S., and European automakers for use in hybrid vehicles. The POWEREV is manufactured by Sankei Industry Co., Ltd., Futaba's affiliate company based in Okayama Prefecture. (From an article in the Nikkan Jidosha Shimbun on November 29, 2013)
>>>Product image

Outlook for FY ending 2015

(in million JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ended Mar. 31, 2014 (Actual Results)	Rate of Change (%)
Overall
Sales	384,700	399,378	(3.7)
Operating income	3,800	2,784	36.5
Ordinary income	2,400	2,365	1.5
Net income	100	3,252	(96.9)

-In the fiscal year ending March 2015, overall sales are expected to fall 3.7 percent year-on-year. The Company forecasts earning growth in North America, Europe and Asia, while projecting double-digit year-on-year decreases in both sales and operating income in Japan.

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	2,586	2,162	2,214

-Most of the Company's R&D activities are for automotive components.

R&D Activities

-The Company has conducted various research and development activities as follows:

• Development of lightweight and low-cost products in the areas of exhaust systems parts, body frame parts, suspension parts, and fuel systems parts to help automakers produce lighter vehicles
• Development of high-performance, compact, and lightweight exhaust heat recovery systems to improve the fuel efficiency of hybrids and other vehicles
• Development of heat management systems so as to maximize energy efficiency
• Development of high-strength body frame parts made from thin steel sheets by adopting hot-stamping methods and using high-tensile steel sheets that achieve 1,180 MPa. These technologies are expected to help automakers produce lighter vehicles with superior collision safety performances
• Development of PM/NOx treatment devices for diesel vehicles to reduce exhaust emissions
• Development of environmentally friendly heat exchange equipment
  

Capital Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Japan	8,998	11,379	9,558
North America	2,681	3,056	1,238
Europe	1,245	699	296
Asia	8,548	1,531	2,289
Total	21,474	16,667	13,382

-In FY ended Mar. 2014, the Company invested in installing production equipment at the automotive parts business (mainly assembly and welding lines and dies and jigs) to streamline operations and reduce labor to improve its productivity, and also to deal with model changes.

-The Company plans to invest JPY 23,000 million during FY ended Mar. 2015.

Planned Capital Investments (Automotive Parts)

(As of Mar. 31, 2014)

Name (Location)	Purpose	Planned investment (in million JPY)	Starting	Planned Completion
Futaba Industrial Co., Ltd.
Head Office, Okazaki Plant (Aichi Pref., Japan)	Production facility	1,700	2013.05	2015.03
Midori Plant (Aichi Pref., Japan)	Production facility	300	2013.10	2015.03
Chiryu Plant (Aichi Pref., Japan)	Production facility	200	2013.11	2015.03
Kota Plant (Aichi Pref., Japan)	Production facility	700	2012.10	2015.03
	R&D facility	600	2014.03	2015.03
Mutsumi Plant (Aichi Pref., Japan)	Production facility	500	2013.05	2015.03
Tahara Plant (Aichi Pref., Japan)	Production facility	850	2013.04	2015.03
Takahashi Plant (Aichi Pref., Japan)	Production facility	350	2012.10	2015.03
	Dies and jigs etc.	4,900	2012.10	2015.03
Consolidated subsidiary
Futaba Kyusyu Corp., Imari Plant (Saga Pref., Japan)	Production facility	100	2014.03	2015.03
Futaba Kyusyu Corp., Nogata Plant (Fukuoka Pref., Japan)	Production facility	850	2014.03	2015.03
Futaba Hiraizumi Corp. (Iwate Pref., Japan)	Production facility	200	2014.04	2015.03
Apics Co., Ltd. (Aichi Pref., Japan)	Production facility	200	2014.03	2015.03
FIC America Corp. (Illinois, USA)	Production facility	300	2014.03	2015.03
Futaba Indiana of America Corp. (Indiana, USA)	Production facility	1,100	2014.03	2015.03
Futaba Industrial Texas Corp. (Texas, USA)	Production facility	70	2014.03	2015.03
FIO Automotive Canada Corp. (Ontario, Canada)	Production facility	2,800	2014.03	2015.03
Futaba-Tenneco U.K Ltd. (Lancashire, UK)	Production facility	80	2013.12	2015.03
Futaba Industrial U.K. Ltd. (Derbyshire, UK)	Production facility	50	2014.01	2015.03
Futaba Czech s.r.o. (Havlickuv Brod, Czech Republic)	Production facility	2,900	2013.12	2015.03
Shenzhen Futaba Metal Products Co., Ltd. (Guangdong, China)	Production facility	200	2013.12	2014.12
Tianjin Shuang Shye Mechanical Industrial Co., Ltd. (Tianjin, China)	Production facility	600	2013.12	2014.12
Tianjin Futaba Shye Chan Mechanical Industrial Co., Ltd. (Tianjin, China)	Production facility	1,000	2013.12	2014.12
Guangzhou Futaba Auto Parts Co., Ltd. (Guangzhou, China)	Production facility	350	2013.12	2014.12
Dongguan Futaba Metal Products Co., Ltd (Dongguan, China)	Production facility	200	2014.01	2014.12
Chngsha Futaba Auto Parts Co., Ltd. (Hunan, China)	Production facility	200	2014.01	2014.12
Chongqing Futaba Automotive Parts Co., Ltd. (Chongqing, China)	Production facility	700	2013.12	2014.12
FMI Automotive Components Ltd. (Haryana, India)	Production facility	500	2014.03	2015.03
PT. Futaba Industrial Indonesia (Bekasi, Indonesia)	Production facility	500	2014.03	2015.03